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An anonymous reader writes in with bad news for the Bitcoin Foundation. "California's Department of Financial Institutions has issued a cease and desist letter to the Bitcoin Foundation for "allegedly engaging in the business of money transmission without a license or proper authorization," according to Forbes. The news comes after Bitcoin held its "Future of Payments" conference in San Jose last month. If found in violation, penalties range from $1,000 to $2,500 per violation per day plus criminal prosecution (which could lead to more fines and possibly imprisonment). Under federal law, it's also a felony "to engage in the business of money transmission without the appropriate state license or failure to register with the US Treasury Department," according to Forbes. Penalties under that law could be up to five years in prison and a $250,000 fine."

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance. -James Madison

Actually, I'd argue both Jefferson and Madison are talking sense here. Jefferson points out that a valuable commercial product should be exploited. Madison says that risk amelioration is important to encouraging business innovation.

How does failing to mention them (valid statements, if unrelated to the GPs point) constitute picking and choosing?

4) No great social stigma was attached to smoking pot in the late 1700s and early 1800s — pot use wasn't considered a problem until the early 1900s.

You forgot to mention that the main reason that pot became an object of opprobrium in the western U.S. was because it was the intoxicant of choice among Mexican immigrants. In the Eastern U.S., it was its association with jazz musicians (a group which was primarily black and Latin American at the time). The fact of the matter is that smoking pot came to be viewed as a problem because it was attributed as the cause of certain minorities forgetting their place.

Well, that was the story W. R. Hearst used to sell his crusade against "marihuana." Actually, he had great investments in forest land as a source of paper pulp for his newspapers. Hearst thought that hemp threatened those investments.

> 1) Botanically, marijuana equals hemp. These are basically two> names for the same plant.

Yup. Adding to this, few people had even heard the term "marijuana" (which, if it arose new today, would be considered an ethic slur) when it was made illegal.

It wasn't until much later, 70s/80s when French botanists bred a low THC strain of cannabis and began pushing for a legal distinction between the two; enshrining into the law the use of a plant which could only be obtained from them (talk about shrewd business)

> 3) Jefferson farmed grew hemp on his Virginia farm> commercially.

Not only that, but look at his buddy George (thats Washington) and the instructions that he gave is slaves. Specifically they had been instructed to sew hemp seed and collect it for several crops, and then, once a large enough seed stock was available, to kill the males on the next crop.

I am aware of no claims of benefit to removing the males on in a crop intended strictly for rope or canvas use. GW grew the sticky icky for the head.

> 4) No great social stigma was attached to smoking pot in> the late 1700s and early 1800s â" pot use wasn't> considered a problem until the early 1900s.

There are some interesting connections between this and both Alcohol prohibition AND the mormon church. The first state to ban cannabis was actually Utah, an event which followed the return of many still polygamist mormons back to the area after having left to mexico years earlier. The story goes that some had picked up cannabis smoking in Mexico and this was an attempt to make them unwelcome. Texas then apparently picked up on this and decided to ban it on the supposition that they should prevent the problem from coming there.

Around this same time we saw Alcohol prohibition end, and the newly created "Federal Bureau of Narcotics" (precursor to the DEA) which had been created partially to fight illegal alcohol, had precious little left to do, and their main man Harry Anslinger went on his crusade to give his agency a purpose, and to deamonize the weed.

I highly recomend checking out the Senate testimony at the time, including the portion where a Doctor from the AMA is told to go home because he stood against making cannabis illegal, calling it an important medicine.

"newly created "Federal Bureau of Narcotics" (precursor to the DEA) which had been created partially to fight illegal alcohol, had precious little left to do"

And people expect the IRS to disappear if/when we get rid of Income taxes. Once created, no government entity willingly disappears. Which is why we should be VERY careful about assigning new powers to a government agency. That beast will never cease to eat.

This is usually the sort of argument that's far more credible if it wasn't always made by someone who's basically just a pothead trying to make scoring weed simpler, usually with a sort of vapid 'Woody Harrelson'-stoned sort of look on their face.

Seriously, the points may be entirely credible, but the message is badly corrupted by the typical source.

Why shouldn't it be easier for a pothead to score weed? It's not like it's particularly hard for them now; it's just illegal. I'd rather them be a minor drain on society by playing video games at home all day, instead of a major drain on society by being in prison all day.

Actually, the law came first, then the low-thc "hemp". There was no real distinction other than the basic variant types Sativa, Indica, and Ruderalis.

After it was banned, some french botanists bred a new variety of cannabis with very low THC content. They then pushed for laws internationally to define "hemp" as cannabis with an artificially low THC content, so low that it could only be achieved, without a breeding program, by the purchase of their seeds.

Actually, I'd argue both Jefferson and Madison are talking sense here. Jefferson points out that a valuable commercial product should be exploited. Madison says that risk amelioration is important to encouraging business innovation.

Yes, but Madison was making a more important point about overbearing government regulation (this is from the Federalist Papers arguing for a Constitution that limited government authority). Risk is always a consideration in starting a new business venture, but Madison's point was that when governments go around outlawing things arbitrarily, or, worse, is unable to provide any assurances to a prospective entrepreneur as to their ability to engage in certain commerce, then business innovation will simply cease.

An important lesson for today. In California, if you're shopping for a piece of land to start a business, it's a huge gamble, because in most places the local planning board is unable to tell you what you can and can't do on that land. You have to roll the dice by purchasing the land, explaining your land use proposal, paying the application fees, and hoping that you'll be allowed to use your property.

Oh give me a break. This is an attacking-the-messenger fallacy. If you want to accuse him of appeal-to-authority, that's fine, but your quotes in no way invalidate his.

Further, everyone says something crazy at some time in their lives. If you try hard enough, you can find a crazy quote for anyone famous. Unless everyone, ever, have all been insane, you've got to give some lee-way.

(Besides, your James Madison quote actually makes sense. Sometime the only progress we've achieved have been from visionary merchants, and not prudent ones. It has also been said that you can only count the number of businesses that have been created, but can never count the ones that could have been, but were dissuaded by inept or corrupt governance.)

If this country built a strong cannabis industry, right now, what would the benefits be?

Cannabis in the Industrial Hemp strain does not produce enough THC to get you high. The THC-production-ready strains represent an emerging market thanks to recent changes in the legislative climate.

All cannabis will grow in less-ideal conditions. It is easily grown and harvested on land unfit for the growth of more sensitive crops. See discussions about switchgrass for this concept; the benefits here are the same. Better land utilization means increases in economic wealth, as land is a wealth-bearing asset which holds less value when unused (You own land, but produce nothing? You can SELL it, but you're not gaining wealth by PRODUCING on it).

Industrial Hemp provides strong fibers which you can blend with clothes in 30% hemp 70% cotton to make cotton-like fabric of extremely light weight--sort of like silk--with high durability. Higher hemp content would be perfect for labor-clothes (i.e. denim), as it's ridiculously hard to cut and tear. Hemp is also very smooth and so very comfortable. Spun hemp fiber, being that hemp has better tensile strength, doesn't break down as easily under the stresses of wash and wear, and so produces less lint, so the clothing lasts longer.

Longer lasting, higher-quality clothing made from lower-cost materials means poor people can purchase clothing at a discount price and less often. They are then able to more effectively manage their money, improving their economic situation. The middle class and the rich similarly benefit, ending up with more money to spend elsewhere and stimulate other economic sectors. This represents an increase in wealth via a decrease in the destructive turn-over of goods (i.e. things don't wear out as fast, so are not destroyed as often; and the lower resource intensiveness of production reduces the amount of wealth sunk into creating the good, thus greatly increasing the wealth of society by replacing a high-cost good with a low-cost good of equal or greater value).

Hemp seed is highly nutritious and can be used for feed or food. Hemp seed oil can be processed into biodiesel fuel. Again, this allows for the use of unsuitable land toward a valuable economic end, thus increasing the wealth of society.

Hemp damages the cotton industry. The cotton industry, being large and powerful in the time of slave-negros, thus lobbied congress as is American tradition to produce protectionist laws. Hemp was, for a time, heavily regulated; moving onto hemp production would today require some relatively large start-up costs, despite that the process of spinning plant fibers into thread and yarn is largely the same. It would also incur a frightening amount of risk due to the risk of accidentally growing recreational cannabis (the plant is the same, the seeds look the same, and pollen on bees and in the wind from nearby grow operations could taint your crop and produce high-THC seeds). Government regulation of recreational cannabis would require regular DEA inspections, meaning expensive permits to cover the cost of these inspections, as well as the risk of determining that cross-pollination has created a hybrid and your entire crop can give folks a weak buzz--so you must now raze and burn it at your own expense, a huge loss of wealth.

We would have been better off if we didn't ban the stuff. Jefferson was, in a way, right. Maybe a little overzealous--it's a great crop with wonderful uses and a huge amount of economic benefit, but it's not the absolute top-priority of anything--but he was right.

The House actually passed an amendment to the farm bill the other day that would legalize hemp production for academic research purposes by colleges and universities. So there is some hope. Unfortunately, the farm bill itself failed to pass [wkms.org], primarily due to opposition to food stamp cuts and too-generous subsidies.

If this country built a strong cannabis industry, right now, what would the benefits be?

If hemp is such a wonderplant... why isn't it, in the numerous countries where it isn't illegal, grown in gigaton quantities?

despite that the process of spinning plant fibers into thread and yarn is largely the same.

"Largely the same", but not really the same. (US) Football and (the rest of the world) football are largely the same too if you step back far enough - but such abstractions aren't all that useful in the real world. And you've left out the all important step of obtaining the raw fiber - look at a puff of cotton fresh from the field and a length of hemp stem fresh from the field and you'll understand why cotton was (and is) King of natural fibers.

Cotton lobby. Did you miss that part? They assassinated the hemp industry. They taught us this in HIGH SCHOOL where they insisted that smoking pot one time would give us permanent brain damage and kill our babies. They taught us hemp was great but that evil lobbyists got it banned. Mind you they didn't give us a product comparison, but they did tell us how it got banned in the first place.

Don't think they thought it through? The foundation is theoretically unable to comply, so they have no way to avoid being closed and the executives put in jail. What part of that seems not thought through?

Quite.I think that the foundation could send back a nicely worded letter to the effect that they write software/sponsor the writing of software (delete as applicable). They do not sell cars, sell drugs, or engage in money transfer. They should not be held any more responsible for the use their software is put to, than Microsoft is responsible for MS Word being used to write threatening letters to people.

Also, dear the editors, specifically samzenpus, please link to the original source, in this case Forbes [forbes.com], rather than to some random other website. You might also link to the cease and desist letter [scribd.com] itself.

This is starting to look like DMCA all over again. Person creates software and claims they can't be held responsible for how it's used. Argument and legislation goes into effect pointing out that the software cannot be used for anything legal, and is this illegal to use/develop (can't remember that important detail). Software becomes illegal and original person is left only with the option of creating legal alternatives.

California is applying the rules of the federal regulations on money services businesses, which require state licensure of money transmitters. Those regulations -- 31 CFR Sec. 1010.100(ff)(5)(i)(A) -- define a "money transmitter" as one who provides "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to anotherlocation or person by any means."

Bitcoin doesn't need to be a "legitimate currency" for an exchange which accepts dollars, keeps accounts in dollars and bitcoins, exchanges one for the other, and transmits dollars and bitcoins back to people to qualify as a money transmitter under the rules.

Uh, yeah, it did, the moment it became responsible for enabling the transactions. You can't have it both ways. It's either currency, or it is not. Jeezuz, what kind of geek fantasy world must one live in to think that bitcoin would actually become some legitimate alternate currency and then not end exactly the way it appears to be ending.

So, is Smith & Wesson responsible for people in certain areas using guns as a currency? Whether or not bitcoin is a currency has nothing to do with whether or not the Bitcoin Foundation is engaging in money transmission.

Next up they'll send a Cease and Desist order to the makers of the Bittorrent protocol. That will stop piracy dead in its tracks!

Are XBox Live Points money?

http://www.xbox.com/en-US/Live/MicrosoftPoints"Microsoft Points are the coin of the Xbox LIVE Marketplace realm. Microsoft Points is a universal system that works across international borders, and is even available if you don't have a credit card. "

They were not jailed for failing to predict it, but for giving (provably) false assurances that no earthquake was eminent. Subtle difference, and one the "science community" seems to conveniently forget when bringing this story up.

The seven defendants, who belonged to the National Commission for the Forecast and Prevention of Major Risks, were accused of offering an unjustifiably optimistic assessment to the local population a week before the disaster. By then, the area had been hit by some 400 tremors over a period of four months and a local researcher had warned of the risk of a major earthquake, largely on the basis of abnormal radon emissions.

But after an extraordinary meeting of the commission in L'Aquila, one of the experts told a press conference that the situation was "normal" and even "favourable" because potentially destructive energy was being released through the tremors. The prosecution, which brought charges of multiple manslaughter, maintained that lives could have been saved had people not been persuaded by the assurances to remain in the area.

They were in a position of authority on the subject, yet they failed to exercise due diligence with respect to their own research. They ignored evidence that did not fit their own world view, and they presented their own as fact. The correct answer would have been "we don't know, take precautions", when asked. They didn't give that answer, and because of that 307 people died and 1,500 were injured. 80,000 lost their homes, but that would have happened regardless.

The law tends to make you responsible even if you didn't built in a off switch. That's why the guys putting up designs for 3D printed guns need to be careful. Now they are widely distributed and there is no way to recall them they may well be liable under anti trafficking/export laws.

Saying "it's out of our hands now" is usually not a good defence. Having said that it seems that the original author of the BitCoin protocol would be the one who is liable, and no-one knows who he or she is.

That is like saying the author of "The Anarchist Handbook" is liable for somebody building a bomb after being "inspired by" the book. Or similar kinds of actions. I suppose some guys in Hollywood have had lawsuits over various suicides and other nonsense.... and those lawsuits just get thrown out as well.

Your comment about the 3D printed guns is hardly a good reference as well since that has yet to work its way through the judicial system. While it is a "roll of the dice" in terms of what the final outcome might be, there have been numerous situations where the law meets new disruptive technologies. California is in a slightly better situation than most in terms of having to cope with advanced technology and its impact upon legal principles, but there still are a whole bunch of Luddites that lurk in the shadows trying to jump onto anything that seems new or innovative.

In regards to Bitcoins, I think the big deal may be for those who are users of the software and may be liable under this particular law. I have a feeling that would just introduce a sort of Barbara Streisand effect into the debate with thousands of Californians who will purposely download the software just to "stick it to the man" and open the whole thing into a major political debate that will ultimately need to be resolved by the state legislature (with consequences at the ballot box for missteps). I can only imagine the 1st amendment issues alone that might be brought up if a particular piece of software is declared illegal simply because of its protocol. The Federal government tried that with calling some types of software as a "munition" and therefore couldn't be exported (like PGP and the related GPG), but in the long run ordinary citizens weren't prosecuted either, certainly not on a widespread basis. I have a hard time seeing that happen in the case of Bitcoin being something new.

As Bitcoin grows more successful, there will be increasing interest in subjecting it to regulation, just like any other financial instrument.

The thing is it's not positioned as a financial instrument, but a currency. Financial instruments - their issue, trading, and reporting - is quite regulated as well. The whole anonymity aspect isn't going to play well no matter how it's dressed up.

No it's not. Only an idiot actually believes that. In order to be a real currency, you kinda have to have a lot of people use it to directly buy and sell things.

You can already buy and sell things with Bitcoin. Example: Bitlasers. [bitlasers.com] So where is the line? How many items have to be sold before it becomes a currency? The logical answer would probably be "one".

Does that mean a pig is now a unit of currency as I used it to buy goods and services (off the same person).

Probably not since the pig is not used as a medium of exchange [wikipedia.org] and it is not used as a as a unit of account [wikipedia.org] so it does not meet the definition of being money. (It is arguably a store of value however) While it would be possible to use pigs as currency in theory, in common practice it would simply be used in barter transactions. You can barter for goods or services. While you could channel your inner Guy Fieri and say that bacon is "money", it wouldn't be in the financial sense of the word.

Bitcoin on the other hand fits the definition of money (medium of exchange, store of value and unit of account) to the letter. Doesn't mean using it is a good idea as it is very risky and relatively illiquid. But it certainly would be accurate to describe bitcoin as a currency.

Once it has worth of its own (the ability to receive a salary and to buy bread and pay rent w/o relying on converting to an outside currency) then it will be a currency. Right now it's a digital commodity, much like gold or gemstones.

And that will never happen, because governments will want to be paid tax in the currency of the land. That means that conversion will always have to exist, and whilst it always exists, they will regulate it.

Governments and the banks will fight tooth and nail to maintain the monopoly over their money that they enjoy. They won't stand for a second to have all their assets devalued because nobody wants to trade with them.

In 2012, Governor Brown introduced a wide-ranging government reorganization plan to improve efficiencies within state government. As part of the Governor's Reorganization Plan (GRP), the Department of Financial Institutions (DFI) and Department of Corporations (DOC) will become divisions under the new Department of Business Oversight, effective July 1st.

Confirmation from an American authority that Bitcoin is a legitimate form of money.

I've said it before and I've said it again because it doesn't appear to be sinking in, Bitcoin fanatics live in a serious Reality Distortion Field. The federal and state governments don't give a rats ass whether you conduct your financial transactions in dollars, Bitcoins, or jars of hamster poop - all they care about is that you abide by the regulations when you start using them for a method of exchange or start acting like

The way I translate this is that the US Gvt waited patiently for this to fold under its own weight and collapse. Now it looks like it's catching on so they've decided to try to kill it. Good Luck. I guess the creator remained anonymous for a reason.

I wonder why California felt the Bitcoin Foundation was in violation of the law, which states that the following entities are exempt [ca.gov] from this licensing requirement:

An operator of a payment system to the extent that it provides processing, clearing, or settlement services, between or among persons excluded by this section, in connection with wire transfers, credit card transactions, debit card transactions, stored value transactions, automated clearing house transfers, or similar funds transfers, to the extent of its operation as such a provider.

If they're going to claim that the Bitcoin Foundation is engaged in the business of money transmission, wouldn't it be because they consider them to be the "operator of a payment system" as described in the law [ca.gov]? Which would appear to exempt them from the licensing requirement.

No, the 'payment system' you mention is the kind of thing a restaurant or shop does. They don't need to be licensed, but a central entity that works like a bank does have to. If it looks like a bank, flies like a bank and quacks like a bank, then it is a bank and should be licensed.

That's nice.Except for the part where the bitcoin foundation only distributes software.

Except by the own admission, they "standardizes, protects and promotes the use of bitcoin cryptographic money for thebenefit of users worldwide." Also, they appear to intend to use foundation money to lobby and fund a group of core developers.

Actions they take when they protect and promote, say if they involve actual sale or exchange of bitcoin (e.g., accepting donations from external developers/lobbyist in bitcoin converting them to USD on their behalf and kicking that money back to fund external developers/lobbyist) may not be looked upon so benignly...

Assuming this policy making board gets what they want... either that the foundation becomes licensed to do business in California as a financial transaction agency (aka a "bribe" as it means the policy board collects some additional revenue) or the foundation is shut down.

What exactly do they think is going to happen if the foundation is shut down? That the software will stop being used or that nobody will be distributing Bitcoin clients? For something published under the GPL?

Any time someone invents a way of moving value/wealth around, its going to be subject to regulation by governments looking to prevent its use by criminals and bad guys to move their ill-gotten gains and hide where their money came from.

Doesn't matter if its Bitcoin, US dollars, Second Life currency or cute cat pictures, if it can be used to buy stuff in the real world and has a real-world value, the governments of this world are going to want to regulate it.

We are uncomfortable that your fiat currency is a) starting to make our fiat currency look a little silly, and b) circumventing our ability to control the public. Please stop or we will have to get rough.

For a while, gold was not legal for people to have in large qualtities (The Gold Reserve Act 1934). It wasn't until 1974 that people could own gold again. How long before gold will once again become illegal?

The reasons gold was illegal are the same reasons they want to prevent BitCoin from becoming a public currency -- they don't want competition. By they, I mean the Federal Reserve Bank.